Does the Dow Jones average topping the 13,000 mark for the first time in four years signal that the economy is on a sustainable upward swing?


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NoMuch of the stock market’s meteoric rise is due to the ultra-easy monetary policy pursued by the Federal Reserve.  The Fed has kept its short-term interest rate target close to zero for three years and indicates that no change may take place for another three years or more.  Its pumping of money into the economy and purchase of financial assets has driven long-term interest rates sharply down as well.  Investors seeking better yields have migrated to stocks, while many companies have used their cash stockpiles to buy back shares.  Although various economic reports have been better, oil prices, Europe, China, home foreclosures, and government deficits all could derail a sustained upswing in both economic growth and the Dow Jones.

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